Second BAE boss detained in US

Heavy handed: The US Department of Justice has issued subpoenas on Mike Turner, left, and Sir Nigel Rudd

By Russell Hotten, Industry Editor

12:01AM BST 19 May 2008

City grandee Sir Nigel Rudd, chairman of airports operator BAA and deputy chairman of Barclays Bank, was one of the two BAE Systems executives detained briefly last week by US officials investigating allegations of corruption by the UK defence company.

Sir Nigel, a non-executive director at BAE, was issued with a subpoena by investigators from the Department of Justice (DoJ) when he arrived at New York's Newark Airport en route to a holiday in Florida. Yesterday, The Sunday Telegraph disclosed that Mike Turner, BAE's chief executive, had been detained at an airport in Texas, where his laptop and Blackberry were seized.

The DoJ is investigating claims that BAE paid bribes in the 1980s and 1990s to win the £20bn Al Yamamah arms deal with Saudi Arabia. News of the detentions will further strain relations between Washington and London over the DoJ's probe, as Sir Nigel has been at BAE less than two years and had nothing to do with the Saudi deal.

In 2006 Britain's Serious Fraud Office controversially dropped its own investigation into Al Yamamah, and there have been claims Whitehall is dragging its feet over requests from the DoJ for information. The detentions may be a sign of the DoJ's determination to raise the stakes, although one source said last night: "It could equally be a sign of frustration."

Mr Turner, who leaves BAE in July and is in talks with several companies about non-executive jobs, was detained at George Bush International Airport, in Houston, while on BAE business. His personal electronic equipment was examined and he was issued with a subpoena. It was unclear last night if the subpoena was a request for him to return to the US to give evidence to the DoJ in person, or to provide written information.

A Foreign Office official said that he understood that the treatment of Mr Turner was "pretty heavy handed." He was released after about 40 minutes and allowed to continue his business, which is thought to been a visit to BAE's huge armoured vehicle factory at Seeley, Texas. The chief executive is now back in the UK.

On his arrival at Newark Airport's customs department Sir Nigel was asked to accompany officials to a private room, where he was questioned briefly and a subpoena issued. The process is understood to have taken no longer than 30 minutes.

One source said the DoJ were "polite and courteous", adding: "Nigel isn't easily fazed. I think he thought it was rather exciting."

Also last week, three unnamed executives working for BAE Inc, the company's American operation, were issued with subpoenas at their homes. The incidents come just two weeks after BAE hoped to drawn a line under corruption allegations with publication of the Woolf Report into the company's ethical standards and procedures.

BAE's investors have been largely untroubled by the controversy over bribery and corruption, and the company's share price has performed strongly in the past two years. Only when it was revealed last year that the DoJ had begun its probe did BAE's share come under pressure, and this latest news could hit the price today. The US military is now BAE's single biggest customer.

A BAE statement yesterday said: "The company confirms that last week the DoJ served a number of additional subpoenas in the US on employees of BAE Systems Plc and BAE Systems Inc as part of its ongoing investigation, which the company has previously announced. The company has been and continues to be in discussion with the DoJ concerning the subpoenas served in the course of its investigation."

Liberal Democrat Treasury spokesman Vince Cable said yesterday reports of the detentions "illustrate that the investigation into alleged corruption over this arms deal is very far from closed."